Colonial State Offers 15-year Fixed-rate Loan
Sydney Morning Herald
Tuesday March 11, 1997
The growing belief among financial analysts and home owners that interest rates have bottomed and are likely to rise again has prompted Colonial State Bank to offer a 15-year fixed-rate mortgage, the first of its kind in Australia.
Colonial State's new product comes amid increasing demand for fixed-rate loans, which have traditionally been ignored by Australian borrowers despite their popularity overseas.
The rate on the 15-year loan will depend on professional money market conditions on the day the borrower settles. The indicative fixed rate is currently 9.99 per cent and Colonial is offering a guaranteed rate of 10.19 per cent regardless of what happens to market rates on settlement.
Industry experts believe the new popularity of fixed loans here reflects the swag of low-rate deals being offered by lenders, and growing opinion that official interest rates have bottomed and that mortgage and business loan rates can only go up in the next few years.
"We are at a point in the interest rate cycle where there's a body of opinion that we are at a low end of the cycle," said the managing director of Colonial State, Mr Stuart James.
"If you are looking for peace of mind going forward you may want to lock in."
Recent demand for Colonial State's 10-year fixed-rate product spurred the introduction of the 15-year loan. Colonial will pay $1,001 to customers who refinance from an existing loan with another institution.
With variable home loan rates as low as 6.85 per cent, rates will have to rise significantly for borrowers to save on higher longer-term fixed rate deals.
But two-year rates of 7.5 per cent compare favourably to the standard variable rates of most banks of 7.55 per cent. Three-year rates of 7.85 per cent will also be in the money if official rates rise by 0.5 percentage points or more during that period.
© 1997 Sydney Morning Herald